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Shrugging it off

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Shrugging it off

Weekend Market Update - March 31, 2023

Andrew Moss, CMT
Mar 31, 2023
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The Markets

The first quarter of 2023 is over and stocks are up.

SPY 0.00 is up +7.50% YTD.

QQQ 0.00 is almost three times that, +21.34%

All while we have -

  • Higher inflation

  • Higher interest rates

  • Tighter monetary policy from the Federal Reserve

  • and a Banking Crisis!

We did just have a banking crisis, right?

Twitter avatar for @AlphaMind101
Steven Goldstein @AlphaMind101
Does anyone remember the March 2023 banking crisis?
4:04 PM ∙ Mar 31, 2023
17Likes2Retweets

The 16th largest bank in the country, Silicon Valley Bank, is gone.

Credit Suisse had to be bailed out; purchased by UBS at fire-sale prices.

What do we know about markets that don’t do what they’re “supposed” to do?

When stocks “should” do something, and they don’t, that’s useful information. When stocks rally on lackluster, or even disappointing news, that’s also useful information.

It would be hard to argue that there hasn’t been a reason for stocks to go lower. Some would even say the recent news and events should’ve taken it drastically lower.

Yet here we are.

Up for the month. Up for the quarter. Up for the year.

The implications of this type of action have been bullish.

Here’s Ryan Detrick, CMT with the stats.

Twitter avatar for @RyanDetrick
Ryan Detrick, CMT @RyanDetrick
Here are the previous 23 times the S&P 500 gained >5% two quarters in a row. Higher 20 times and up 13.5% on average a year later. Look at those dates, they didn't happen right before a new bear market took over is my big takeaway.
Image
4:44 PM ∙ Mar 31, 2023
48Likes8Retweets
Twitter avatar for @RyanDetrick
Ryan Detrick, CMT @RyanDetrick
Here's a chart of the 23 previous times the S&P 500 was up 5% or more back-to-back quarters. If you squint, it appears big drops soon after aren't normal. In fact, up and to the right appears to be more normal.
Image
4:47 PM ∙ Mar 31, 2023
40Likes8Retweets

Traders and investors do better by focusing on what is, rather than what should be.

Here are the charts to show more of what is happening.

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The Charts

SPY is up and out of the pinch zone, that just last week seemed to have prices locked in congestion. It zoomed right through the 407 pivot from early February to close at 409.39. Next up is 418.

QQQ confirmed the breakout today and moved all the way to the 320 pivot. The next pivot higher now is 333.

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IWM has averted disaster and is back above its 8 and 21-day MAs. Next up is the 200-day MA at 180.81, and the swing high anchored VWAP. That could be significant potential resistance.

DIA Even the Dow 30 is moving higher and through its 50-day MA.

DXY The Dollar is doing its part to help, moving steadily lower.

VIX Volatility feels almost non-existent compared to where it was last October.


Again and again

Patterns in the market repeat because human nature repeats. In fact, human nature, that is human emotion, never really changes. It’s fascinating to watch the effects show up over and over again. That really is the beauty and utility of technical analysis.

This next chart was created and made famous by Justin Mamis (a well-regarded chartist, author, and technical analyst) many years ago to demonstrate some of the bigger patterns of investor sentiment. It more recently made the rounds via Helene Meisler at last year’s CMT Association Annual Symposium.

The patterns recur time and again across history and this chart is often revisited during down markets. Sentiment can be an enlightening component of technical analysis. Assessing how the masses feel about things can be telling. While chart comparisons may never be identical, they do often “rhyme.”

Looking at it now it’s striking how amazingly similar it looks to the current chart of the SP 500. And it begs the question, would SPX 4200 signal the “Denial” stage of the move?

Looking ahead, Jeffrey Hirsch, the editor of The Stock Trader’s Almanac, has these stats about April in pre-election years.

Twitter avatar for @AlmanacTrader
Jeffrey A. Hirsch @AlmanacTrader
April is DJIA’s #1 and S&P 500’s #2 month in pre-election years. Average gains in 18 pre-election year Aprils since 1950 of 3.9% and 3.5% respectively. The only S&P 500 April loss was in 1987. jeffhirsch.tumblr.com/post/713060954…
Image
6:30 PM ∙ Mar 28, 2023
69Likes17Retweets

As you can see, the average move is +3.5%. $SPX 4200 is about 2.5% higher from here.

Hmmm.

What do you think?

I’d love to hear it.

Please leave a comment, or join the conversation on Twitter to share your thoughts.

Leave a comment


Q1 is in the books. We’ll get to look at weekly and monthly charts tomorrow morning.

Join the fun here. @Andy__Moss

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***This is NOT financial advice. NOT a recommendation to buy, sell, or trade any security. The content presented here is intended for educational purposes only.

Andrew Moss is an associated member of T3 Trading Group, LLC (“T3TG”) a SEC registered broker/dealer and member of FINRA/SIPC.  All trades placed by Mr. Moss are done through T3TG.

Statements in this article represent the opinions of that person only and do not necessarily reflect the opinions of T3TG or any other person associated with T3TG.   

It is possible that Mr. Moss may hold an investment position (or may be contemplating holding an investment position) that is inconsistent with the information provided or the opinion being expressed.  This may reflect the financial or other circumstances of the individual or it may reflect some other consideration.  Readers of this article should take this into account when evaluating the information provided or the opinions being expressed.

All investments are subject to risk of loss, which you should consider in making any investment decisions.  Readers of this article should consult with their financial advisors, attorneys, accountants or other qualified investors prior to making any investment decision.   

POSITION DISCLOSURE

March 31, 2023 4:00 PM

Long:  AMZN0421C102, NOW, SCHW0421C55, SQ0414P65

Short:  

Options symbols are denoted as follows:

Ticker, Date, Call/Put, Strike Price

Example: VXX1218C30 = VXX 12/18 Call with a $30 strike

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